Oh Yes They Did!

I’ve been trying to resolve what’s
behind the recent inversion of the historic premium that West Texas
Intermediate [WTI] Crude Oil has enjoyed versus Brent Crude? Historically, West Texas Intermediate Crude
Oil trades at a premium price to Brent Crude Oil for quality as well as
logistical reasons. In recent weeks and
months – WTI has been trading at a deep discount to Brent Crude:

From
an historical perspective, this price disparity pictured above is BACKWARDS. There is a reason:

Recently,
I shared with my subscribers some unusual machinations which are acknowledged
to have occurred by the U.S. Dept. of Energy [DOE] back in May / June 2008 –
from the DOE 2008 annual report:

The excerpt above illustrates that the
DOE stopped filling the Strategic Petroleum Reserve [SPR] as of last June
[2008] – an activity that had been underway – more or less continuously – since
1999.

But the above excerpt says more than
just that; it specifically states that,

“Oil from the MMS offshore leases has been exchanged for other crude oil”

The “exchange” cited in the
aforementioned quote above is also known as an “OIL SWAP.”

I have
long suspected that the US Gold Reserve is being used by the gold cartel as a
tool to help it try capping the gold price.
See for example the April
23, 2001 press release by the Gold Anti-Trust Action Committee [ http://www.gata.org/node/4223 ] which
refers to my then recently published article, “Behind Closed Doors”. The complete article is available at the
following link: http://www.fgmr.com/clsddoor.htm

“Behind
Closed Doors” provided compelling evidence that part of the US Gold Reserve had
been swapped for gold in the Bundesbank.
Gold was then removed from the Bundesbank’s vault and loaned into the
market as part of the gold cartel’s price capping scheme.

We now
have more evidence that all may not be well in Fort Knox. Many thanks go to Bill Rummel of Charleston, South
Carolina for bringing the following to my attention.

The US
Treasury quietly made a subtle change to its weekly reports of the US
International Reserve Position, which includes the US Gold Reserve. This change was first made on May 14th. The differences can be seen by comparing the
report’s old format release on May 8th to the new format used the following
week. Here are the links:

Note the
additional description of gold provided in the new reporting format. It says the US Gold Reserve is 261.499
million ounces and importantly, that the gold is now reported “including gold deposits and, if
appropriate, gold swapped” [emphasis added].

This
description provides clear evidence that the US Gold Reserve is in play. Gold has been removed from US Treasury vaults
and placed on deposit, presumably in the couple of bullion banks the Treasury
has selected to assist with its gold price capping efforts.

The U.S. Treasury has only recently
acknowledged that they have been involved in gold swaps. Not withstanding, for accounting purposes,
they still claim to possess the SAME
NUMBER OF PHYSICAL OUNCES. When
gold is swapped or leased – it almost always physically leaves the vault and it
is sold into the market – and it is replaced with an IOU.

As evidenced above, crude oil has also
been swapped – likely sweet crude, WTI - for less expensive sour crude. Under
such a scenario – physical sweet crude left the SPR – creating a market glut of
“premium sweet oil”. This set off an
engineered over-supply chain reaction in the crude complex which depressed
WTI’s price relative to Brent Crude. Because
supply chain storage facilities are finite and were completely filled in the Texas / Cushing region –
this also contributed to further price declines in the crude complex.

This would also explain the phenomena
of the world’s VLCC [very large crude carrier] Fleet being fully booked for
storage purposes while the Baltic Dry Index is at or near record lows.

Like the price trend of gold - the price
trend of WTI crude is widely viewed as a benchmark for inflationary
expectations in the economy.

In the scenario described above, there
would be NO APPRECIABLE ACCOUNTING CHANGE
to the reported gross number of barrels in the Strategic Petroleum Reserve
[SPR] – but only the “subtle acknowledgement” of the composition alluded to in
the DOE’s annual report.

We know that such actions were
contemplated because of law makers’ unsuccessful attempt [in May of 2008] to
pass a law making such actions legal and above board when H. R. 6067 failed to
pass into law – because it was deemed to compromise long-term U.S. energy
security:

H.R. 6067, The Invest in Energy Independence Act

This item is from the 110th Congress (2007-2008)
and is no longer current. Comments, voting, and wiki editing have been
disabled, and the cost/savings estimate has been frozen.

Detailed Summary

` Invest
in Energy Independence Act - Instructs the Secretary of Energy to publish a
plan to: (1) exchange light grade petroleum from the Strategic Petroleum
Reserve (SPR) for an equivalent volume of heavy grade petroleum plus certain
cash bonus bids received that reflect the difference in the market value
between light grade and heavy grade petroleum and the timing of deliveries of
the heavy grade petroleum; (2) deposit into the SPR Petroleum Account, from the
gross proceeds of the cash bonus bids, the amount necessary to pay for the
costs of the exchange; (3) deposit 90% of the remaining net proceeds from the
exchange into the Energy Independence and Security Fund established by this
Act; and (4) deposit the remaining balance into the SPR Petroleum Account to
acquire additional petroleum for the SPR.

So we do know that efforts were made to
do this “above board”. Heck, even then
candidate for President Obama liked
the idea,

ANALYSIS-Obama oil
plan may weaken U.S.
emergency stockpile

Tom Doggett

Reuters North American News Service

Aug 07, 2008 11:43
EDT

WASHINGTON (Reuters) -
Democratic presidential candidate Barack Obama's plan to release oil from the
Strategic Petroleum Reserve may lower crude and gasoline prices in the short
term, but it could also leave the United States more vulnerable in a supply
emergency.

Obama called this week for
easing fuel prices by releasing some 70 million barrels of light, sweet crude
from the nation's stockpile and swapping it for less expensive heavy, sour oil.

The hope is that putting
more oil on the market will push down crude prices and those savings will be
passed on to consumers at the gasoline pump.

Cheaper crude would make it
more profitable for refiners to make gasoline, diesel fuel and heating oil, and
encourage them to produce more of those petroleum products. The additional
supplies would lower the prices for the fuels.

"Would it bring down
prices initially? Sure," said Sarah Emerson, managing director of Energy
Security Analysis Inc, a Massachusetts-based consulting firm. "It's more
supply and the price will go down."

Obama says releasing oil
from the reserve is meant to provide short-term relief for consumers, and is
not a long-term solution to the nation's energy problems……

From all of this evidence – and yes it is EVIDENCE – it is now highly likely that
after failing to gain legal authority to utilize sweet crude in the SPR – DESPERATE authorities – who, no doubt
will wrap themselves in the flag and claim they acted in the name of National
Security – DID CONDUCT oil
swaps. The timing of all these events
lines up perfectly with the Waterfall decline in oil prices:

The smoking gun is the counter intuitive “lingering wide
price discrepancy” with West Texas Intermediate trading at a big discount to
Brent Crude Oil.

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